NATIONAL RAILROAD PASSENGER CORPORATION, APPELANT V. ATICHISON,
TOPEKA, AND SANTA FE RAILWAY COMPANY, ET AL.
No. 83-1492
In the Supreme Court of the United States
October Term, 1983
On Appeal from the United States Court of Appeals for the Seventh
Circuit
Memorandum for the United States as Appellee in Support of the
Appellant
This case began in 1980 when five railroads (appellees here) sued
the National Railroad Passenger Corporation (Amtrak), challenging the
constitutionality of a reimbursement formula contained in a 1979
amendment to the Rail Passenger Service Act (RPSA), 45 U.S.C. (& Supp.
V) 501 et seq. The reimbursement formula, 45 U.S.C. (Supp. V) 565(f),
provides that the appellees are to reimburse Amtrak at a specified
rate for free or reduced-rate travel on Amtrak trains by certain
current and retired railroad employees and their dependents ("pass
riders"). The appellees' principal contention was that the statutory
reimbursement formula impaired their contractual right to be relieved
of their responsibility for the provision of intercity rail passenger
service.
Because the constitutionality of an Act of Congress was drawn in
question, the United States intervened as a defendant. See 28 U.S.C.
2403(a). On November 22, 1982, the district court issued an opinion
upholding the statute and dismissing the case (J.S. App. 11a-27a).
The court first held that providing pass privileges had not been a
legal responsibility of the railroads prior to the passage of RPSA,
but was instead a wholly gratuitous practice on the part of the
railroads. Accordingly, the court held that providing pass privileges
was not among the "responsibilities" that Amtrak assumed after it took
over the railroads' former common carrier obligations. The court
further held that even under the "harshest possible scrutiny" (J.S.
App. 25a) to which congressional regulation of commerce could be
subjected, the pass rider reimbursement legislation did not violate
due process. Finally, the district court held that Congress had acted
rationally in setting the statutory reimbursement formula.
The court of appeals affirmed in part and reversed in part (J.S.
App. 1a-10a). The court agreed with the district court's conclusion
that the railroads had no contractual right to be free of all
responsibility for reimbursing Amtrak for pass privileges. But the
court invalidated the 1979 amendment on the theory that the
reimbursement formula contained therein resulted in the railroads'
being required to pay Amtrak amounts in excess of the incremental cost
of employee pass privileges. The court reasoned that these additional
amounts presumably went to support Amtrak's general operations and
that the statute therefore impaired the railroads' contractual right
to be relieved of all responsibility for the provision of intercity
rail passenger service.
Throughout this litigation, the United States has defended the
constitutionality of the statute, and it continues to do so in this
Court. However, because Amtrak has already docketed its own appeal
from the decision below, we have concluded that there is no need for
the United States to docket a separate appeal. Instead, we are filing
this memorandum as an appellee in support of the appellant (see Rule
10.4 of the Rules of this Court) in order that the Court may give
prompt consideration to Amtrak's appeal. We fully endorse Amtrak's
arguments in support of the constitutionality of the statute (J.S.
8-15), and we join Amtrak in urging the Court to note probable
jurisdiction in this case. We add only a few brief points in support
of Amtrak's appeal.
1. At considerable cost to Amtrak, the court of appeals invalidated
a statute that Congress has twice approved (see J.S. 6-7). The
decision below is predicated on the erroneous assumption that the
railroads' release from their former common carrier obligations
constituted a contractual right to be free of all future obligations
to provide funds that might be used for Amtrak's general operations.
/1/ The court of appeals failed to address the contention of Amtrak
and the United States that, in releasing the railroads from their
former common carrier obligations, Congress did no more than exercise
its sovereign prerogative to provide regulatory relief to the
railroads; it did not provide them with a contractual assurance of
permanent immunity from reimposition of some portion of those
obligations. The court's misunderstanding of Congress's action in
turn led it to misconstrue the Basic Agreement between Amtrak and the
railroads.
a. The court of appeals found the railroads' contractual right in
Section 2.1 of the Basic Agreement, which provides that "(f)rom and
after May 1, 1971, Railroad shall be relieved of its entire
responsibility for the provision of Intercity Rail Passenger Service"
(J.S. App. 2a). But this section of the Basic Agreement does no more
than reiterate the terms of the release from common carrier
responsibility authorized by the statute itself. See 45 U.S.C.
561(a). Moreover, only the United States, and not Amtrak, was
empowered to release the railroads from their former common carrier
responsibilities. Thus, Section 2.1 of the Basic Agreement has no
force independent of Section 401 of the RPSA, 45 U.S.C. 561, and the
railroads' alleged contractual rights must be analyzed in light of
their statutory underpinnings.
b. Neither a state nor the federal government may barter away
essential attributes of sovereignty. Norman v. Baltimore & O.R.R.,
294 U.S. 240, 309-310 (1935; Home Building & Loan Ass'n v. Blaisdell,
290 U.S. 398, 436-437 (1934); Contributors to the Pennsylvania
Hospital v. City of Philadelphia, 245 U.S. 20, 23 (1917). For this
reason, statutory enactments are presumed to be declarations of public
policy that do not create contractual obligations binding upon the
government. Dodge v. Board of Education, 302 U.S. 74, 79 (1937). A
statute is itself treated as a contract only "when the language and
circumstances evince a legislative intent to create private rights of
a contractual nature enforceable against the State." United States
Trust Co. v. New Jersey, 431 U.S. 1, 17 n.14 (1977).
No such intent may be discerned in the RPSA. On the contrary,
Congress "expressly reserved" its right to "repeal, alter, or amend
(the RPSA) at any time" (45 U.S.C. 541). It is thus clear that when
Congress authorized the railroads' release from their former common
carrier obligations, it was not bargaining away its power to regulate
interstate commerce, Section 401 of the RPSA, 45 U.S.C. 561, the terms
of which are repeated in Section 2.1 of the Basic Agreement, is part
of a statutory scheme in which the sovereign granted regulatory relief
to promote the Amtrak experiment. It is not a statute by which the
sovereign conferred any sort of contractual immunities upon the
railroads. /2/ And Section 2.1 of the Basic Agreement confers no
greater rights upon the railroads than the authorizing statute.
The court of appeals erred in reading more into the Basic Agreement
than the statute authorized Amtrak to provide. Had the court properly
construed the statute as an exercise of Congress's regulatory powers,
any doubt as to its constitutionality would have been avoided. Cf.
Califano v. Yamasaki, 442 U.S. 682, 693 (1979). The only question in
the case then would have been whether the statutory reimbursement
formula is a reasonable regulation of commerce. As to that issue, the
court of appeals itself had "no doubt that the 1979 amendment may be
sustained as a legitimate exercise of the commerce power" (J.S. App.
9a). This conclusion should have ended the court's inquiry.
2. The court of appeals also erred in refusing to give deference to
Congress's policy choice in calculating and allocating the cost of
pass rider privileges. As the district court recoginized in rejecting
the railroads' due process challenge to the statutory reimbursement
formula (J.S. App. 19a-26a), this is an area in which judicial
deference to legislative judgment is especially mandated. See Usery
v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976).
In Turner Elkhorn, this Court rejected a constitutional challenge
by coal mine operators to Congress's method of calculating and
apportioning the costs of employee death or disability compensation
resulting from black lung disease. The Court held that Congress's
method represented a "rational measure to spread the costs of the
employees' disabilities to those who have profited from the fruits of
their labor -- the operators and the coal consumers" (428 U.S. at 18).
Refusing to "assess the wisdom of Congress' chosen scheme" for
allocation of financial responsibility, the Court concluded (id. at
18-19):
It is enough to say that the Act approaches the problem of cost
spreading rationally; whether a broader cost-spreading scheme
would have been wiser or more practical under the circumstances
is not a question of constitutional dimension.
The 25% service-value formula chosen by Congress here also
approaches the problem of cost allocation and calculation in a
rational manner and should have been upheld by the court of appeals.
Congress did not act whimsically when it adopted this formula. In
deciding that the railroads should compensate Amtrak for pass rider
privileges, Congress knew that the persons receiving such privileges
were employees of the railroads who had expectations created by the
railroads. Like the coal operators in Turner Elkhorn, the railroads
here have "profited from the fruits of their (employees') labor"
(Turner Elkhorn, 428 U.S. at 18).
Moreover, as the Comptroller General concluded in a report
requested by Congress (see J.S. 2, 6-7), pass rider privileges provide
benefits to the employer-employee relationship in the railroad
industry. The railroads benefit, the Comptroller General stated,
"when their employees have a higher morale and better relationship
with their employers because of their passes." GAO, Comptroller
General, Nos. B-196907, CED-80-83, Report To The Congress, "How Much
Should Amtrak Be Reimbursed For Railroad Employees Using Passes To
Ride Its Trains?," at 19 (Mar. 28, 1980) (hereinafter cited as GAO
Report). /3/
Before finally settling on the reimbursement formula at issue in
this case, Congress fully considered a range of alternatives. See
J.S. 6-7; J.S. App. 15a. But as the GAO Report noted, the
"intangible benefits (of pass privileges) are difficult, if not
impossible, to quantify" (GAO Report 18). In these circumstances,
whether a formula based on administrative cost, or based on some
percentage of the system-wide average yield other than 25%, "would
have been wiser or more practical" is not here, any more than in
Turner Elkhorn, a "question of constitutional dimension" (428 U.S. at
19).
Since the formula chosen by Congress was eminently reasonable, the
court of appeals' judgment invalidating the statute must fall even on
the assumption that Section 2.1 of the Basic Agreement created
contractual rights in the railroads independent from the authorizing
statute. As a matter of construction, Section 2.1 should not have
been interpreted to prevent Congress from making reasonable
adjustments to the allocation of costs attributable to activities that
provide the railroads with continuing benefits. Further, even if the
statutory formula is deemed inconsistent with the contract, it is not
an "impairment": Contracts Clause principles do not preclude Congress
from enacting regulatory legislation that serves a substantial public
interest, even if the regulation has the effect of adjusting rights
and liabilities under a contract. See Allied Structural Steel Co. v.
Spannaus, 438 U.S. 234, 240-244 (1978).
It is therefore respectfully submitted that probable jurisdiction
should be noted.
REX E. LEE
Solicitor General
MARCH 1984
/1/ Although the Contracts Clause of the Constitution (Art. I,
Section 10) applies only to the states, this Court has construed the
Due Process Clause of the Fifth Amendment to impose analogous
restrictions on the federal government. See, e.g., Continental
Illinois National Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S.
648, 680 (1935); The Sinking-Fund Cases, 99 U.S. 700, 718-719 (1878).
But when Congress acts pursuant to its plenary commerce power or some
other paramount power, courts have applied a more deferential standard
of review than is generally accorded to state legislation arguably
impairing contractual relations. See, e.g., Lynch v. United States,
292 U.S. 571, 579 (1934); United States v. Porhownik, 182 F.2d 829,
832 (2d Cir.) (L. Hand, J.), cert. denied, 340 U.S. 825 (1950);
Amalgamated Meat Cutters & Butcher Workmen v. Connally, 337 F. Supp.
737, 763 (D.D.C. 1971) (three-judge court) (Leventhal, J.)
/2/ In the district court, the appellees argued that if the release
accorded to the railroads in Section 401 of the RPSA were found to be
a declaration of public policy, subject to Congress's power to revise
or repeal, the government would have the "power to come in the next
day and totally cancel that release." Plaintiffs' Reply Memorandum in
Support of Motion for Summary Judgment 20. The railroads are clearly
correct -- Congress does have the authority under the Commerce Clause
(Art. I, Section 8, Cl. 3) to cancel the entire RPSA experiment and
revert back to the pre-1971 situation. The exercise of such power
would of course be subject to general due process considerations.
See, e.g., Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d
947, 960 (7th Cir. 1979), aff'd, 446 U.S. 359 (1980). Moreover, an
affected railroad might be able to show that cancellation amounted to
a taking for which just compensation would be due. See Penn Central
Transportation Co. v. New York City, 438 U.S. 104, 123-124 (1978).
What is clear, however, is that such a statutory cancellation would
not violate the principles of the Contracts Clause made applicable to
the federal government through the Due Process Clause.
/3/ When Amtrak instituted a restrictive pass rider policy in 1971,
employees of the Penn Central threatened to strike over the issue of
pass privileges. The threat was sufficiently serious for a federal
court to issue a temporary restraining order against the strike. See
Baker v. System Federation No. 1, 331 F.Supp. 1363, 1365 (E.D. Pa.
1971).